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A petrol station in Bilbao. M. Cecilio
Inflation climbs to highest rate in a year due to rising fuel and electricity prices in Spain
Economy

Inflation climbs to highest rate in a year due to rising fuel and electricity prices in Spain

Some basic foodstuffs continue to soar in price, as in the case of olive oil, which increased by 68% in April compared to the previous year and has risen by 200% since January 2021

Edurne Martínez

Madrid

Friday, 31 May 2024, 12:04

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Rising prices continue to give households in Spain no respite. The inflation rate (CPI consumer price index) rose by another three tenths of a percentage point in May, according to data released on Thursday by the National Statistics Institute (INE), to 3.6%, its highest rate for more than a year (April 2023). The main reason has been the rise in fuel and electricity prices compared to a year ago.

The withdrawal of part of the support measures since last January to combat the impact of inflation is having a direct impact on the rate since the start of the year. May was the third consecutive month with a rise in prices and is now eight tenths of a percentage point above its lowest rate this year, when it reached 2.8% in February.

After almost three years of fiscal aid to combat the cost of living crisis - for example, IVA (Spain's sales tax) on electricity had been reduced since June 2021 - the government began to withdraw its support on 1 January, a month in which inflation stood at 3.4%. In February, prices were contained at 2.8% - the first time that the rate fell below 3% since August 2023 - but in March it rebounded to 3.2% due to electricity and fuel costs. It rose again by another tenth of a percentage point in April and in May it rebounded by three tenths of a percentage point to the rate of 3.6% published on Thursday by the INE.

Liquid gold

200% Olive oil

This basic product for Spanish families has tripled in price in three years, with a 70% increase in April (latest available data) compared to the previous year.

Core inflation rose slightly again in May. This is the rate that allows us to analyse the behaviour of prices in the daily basket of products and services, excluding energy costs and unprocessed food, which are the most volatile. It peaked in February 2023 (7.6%) but since then it has gradually fallen to 2.9% in April, the lowest rate in two years, and is now rising to 3%.

In monthly terms (May over April), the CPI rose again by three tenths of a percentage point, registering its fifth consecutive monthly increase. Despite these data, the Ministry of Economy indicated that the evolution of inflation in recent months “has remained stable”, which is allowing “an improvement in the purchasing power of families, who have already recovered the level prior to the pandemic”, while maintaining the “competitiveness” of Spanish companies. “All this in a context of growth of the Spanish economy, higher than the average for the euro zone,” said the department headed by Carlos Cuerpo.

End of the IVA rebate is near

We will have to wait until mid-June for the INE to publish the final CPI data for May to see how much food has risen during the month. The shopping basket has begun to moderate after two years at record levels, but in April it rose again to 4.7%, more than one point above general inflation. Some basic foodstuffs continue to soar in price, as in the case of olive oil, which increased by 68% in April compared to the previous year and has risen by 200% since January 2021, meaning that its cost has tripled in three years.

It should be kept in mind that we are already close to 30 June, the date on which - if there are no surprises - the tax reduction on basic foodstuffs that came into force on 1 January 2023, a year and a half ago, will come to an end. The government set 30 June as the end point for the IVA reduction on foodstuffs and from that day all the products on which this tax was eliminated (bread, milk, eggs, cheese and fruit) will return to a rate of 4%. Oils and pasta will return to 10% instead of the current 5%.

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